An introduction to U.S. macroeconomic policy issues, such as how we use monetary and fiscal policies to promote economic growth, low unemployment, and low inflation.

Monday, August 24, 2009

Test your understanding of economics in the news: Is this a change in supply or a change in demand?

Toward the end of the August 24, 2009 article "Attack on Obama riles Beck's advertisers," Associated Press television writer David Bauder suggests that the price of an advertisement on Glenn Beck's television program is likely to decline in the near future. Is this change in the price of a TV commercial during Glenn Beck's show caused by (a) an increase in the supply of ads during Beck's show, (b) a decrease in the supply of ads during Beck's show, (c) an increase in the demand for ads during Beck's show, or (d) a decrease in the demand for ads during Beck's show.

Read the article and then illustrate this price change with a graph that shows the initial positions of the supply and demand for ads of Glenn Beck's television show and the new positions of the supply and demand curves. (Hint: Only one of the curves has shifted.) There is a link at the bottom of this posting that provides the answer.

NEW YORK – Glenn Beck returns to Fox News Channel on Monday after a vacation with fewer companies willing to advertise on his show than when he left, part of the fallout from calling President Barack Obama a racist.

A total of 33 Fox advertisers, including Wal-Mart Stores Inc., CVS Caremark, Clorox and Sprint, directed that their commercials not air on Beck's show, according to the companies and ColorofChange.org, a group that promotes political action among blacks and launched a campaign to get advertisers to abandon him. That's more than a dozen more than were identified a week ago.

While it's unclear what effect, if any, this will ultimately have on Fox and Beck, it is already making advertisers skittish about hawking their wares within the most opinionated cable TV shows.

The Clorox Co., a former Beck advertiser, now says that "we do not want to be associated with inflammatory speech used by either liberal or conservative talk show hosts." The maker of bleach and household cleaners said in a statement that it has decided not to advertise on political talk shows.

The shows present a dilemma for advertisers, who usually like a "safe" environment for their messages. The Olbermanns, Hannitys, O'Reillys, Maddows and Becks of the TV world are more likely to say something that will anger a viewer, who might take it out on sponsors.

They also host the most-watched programs on their networks.

"This is a good illustration of that conundrum," said Rich Hallabran, spokesman for UPS Stores, which he said has temporarily halted buying ads on Fox News Channel as a whole.

Beck can bring the eyeballs. With the health care debate raising political temperatures, his show had its biggest week ever right before his vacation, averaging 2.4 million viewers each day, according to Nielsen Media Research.

ColorofChange.org quickly targeted companies whose ads had appeared during Beck's show, telling them what he had said and seeking a commitment to drop him. The goal is to make Beck a liability, said James Rucker, the organization's executive director.

"They have a toxic asset," Rucker said. "They can either clean it up or get rid of it."

It's not immediately clear how many of the companies actually knew they were advertising on Beck's show. Sometimes commercial time is chosen for a specific show, but often it is bought on a rotation basis, meaning the network sprinkles the ads throughout the day on its own schedule. Sometimes ads appear by mistake; Best Buy said it bought commercial time for earlier in the day, and one of its ads unexpectedly appeared in Beck's show.

One company, CVS Caremark, said it advertises on Fox but hadn't said anything about Beck. Now it has told its advertising agency to inform Fox that it wanted no commercials on Beck.

"We support vigorous debate, especially around policy issues that affect millions of Americans, but we expect it to be informed, inclusive and respectful," said spokeswoman Carolyn Castel.

Besides the unpredictability of the opinionated cable hosts, the rapid pace of today's wired world complicates decisions on where to place ads, said Kathleen Dunleavy, a spokeswoman for Sprint. She said she was surprised at how fast the Beck issue spread across social media outlets and how quickly advertiser names were attached to it.

UPS' Hallabran said the decision to pull commercials "should not be interpreted as we are permanently withdrawing our advertising from Fox." He said the company wants to reach viewers with a wide spectrum of opinions.

Except for UPS Stores, there's no evidence that any advertisers who say they don't want to be on Beck's show are leaving Fox. Network spokeswoman Irena Briganti said the companies have simply requested the ads be moved elsewhere and that Fox hasn't lost any revenue.

She wouldn't say whether Fox was benefiting from any anti-anti-Beck backlash, with companies looking to support him. Some Beck supporters have urged fans to express their displeasure at companies for abandoning their man.

Beck supporters have suggested that retaliation might have something to do with ColorofChange.org's campaign. One of the group's founders, Van Jones, now works in the Obama administration and has been criticized by Beck. But Rucker said Jones has nothing to do with ColorofChange.org now and didn't even know about the campaign before it started.

Beck's strong ratings — even at 5 p.m. EDT he often outdraws whatever CNN and MSNBC show in prime-time — make it unlikely Beck is going anywhere even as the list of advertisers avoiding him approaches three dozen.

But it could mean advertising time becomes cheaper on his show than such a large audience would normally command. Some of his show's advertisers last week included a male enhancement pill, a law firm looking to sue on behalf of asbestos victims, a company selling medical supplies to diabetics and a water filter company.

Rucker said ColorofChange.org has contacted about 60 companies regarding Beck, and is heartened by the response.

"It's causing a certain conversation around Beck, which I think is important," he said.

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Comments

I welcome comments. Please keep them civil, short and to the point. Obscene, profane, abusive and off topic comments will be deleted. Repeat offenders will be blocked. Thanks for taking part — and abiding by these simple rules.

The following information is provided to help you understand the biases that may be inherent in this blog.My primary U.S. economic policy concern is the fiscal irresponsibility of government.The Baby Boom generation, which I am part of, has spent the past 30 years accumulating massive public debt that will be passed to our children, grandchildren, and subsequent generations.I am not opposed to the reduction or elimination of any government spending program.Yet, politicians tend to call for reduced spending in general terms and fail to publicly declare specific cuts they would make.The primary cause of the massive U.S. public debt is revenue reductions (in the form of tax cuts) without similar decreases in government spending.

I am willing to consider the expansion and addition of government programs as well.I do not mind how much or little the government provides to society as long as it is paid for.I am willing to pay higher taxes for services deemed worthy, whether they be national defense, homeland security, or income assistance to those less fortunate than I.And I am certainly willing to pay less in taxes or to deposit any government check I receive.My generation, the Baby Boomers, has been very good at cutting taxes and increasing the size of government, regardless of which political party is in power.This is a prescription for financial chaos that remains a horrible legacy for future generations.

About Me

I am a professor of economics at Jacksonville University, where I teach courses in introductory economics, comparative economic development, and globalization. I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.